ATI Inc.

Hello and welcome to the ATI third quarter 2023 results conference call. My name is Alex. I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star 5 by 1 on your telephone keypad. If you'd like to remove your question, you can press star 5 by 2. And I'll hand it over to your host, Dave Weston, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to ATI's third quarter 2023 earnings call. Today's discussion is being broadcast on our website. Participating in today's call to share key points from our third quarter results are Bob Weatherby, board chair and CEO, and Don Newman, executive vice president and CFO. Before starting our prepared remarks, I would like to draw your attention to the supplemental presentation that accompanies this call. Those slides provide additional color and details on our results and outlooks. It can be found on our website at atimaterials.com. After our prepared remarks, we'll open the line for questions. As a reminder, all forward-looking statements are subject to various assumptions and caveats. These are noted in the earnings release and in the slide presentation. Now, I'll turn the call over to Bob. Thanks, Dave.

Good morning, everyone. Q3 marked another solid quarter of A&D growth and continued margin expansion for ATI. This morning, I'll highlight three major points. First, aerospace and defense market demand for ATI products is strong, and we expect continued growth for years to come. Second, our transformational actions are driving meaningfully improved results. Better still, we're in the early stages of the journey with many benefits yet to come. Third, our strong execution is delivering for our customers and shareholders. And now some insights into each of these. First up, the continued strong aerospace and defense market demand for ATI's products. Orderly times for some specialty product lines are out as far as the first quarter of 2025, and we're still years away from peak airframe build rates. As recent world events reinforce, safety, security, and sustained performance remain more important than ever. ATI is well positioned to deliver on this expectation. We have the right products, the right capabilities, and the right team. A&D sales hit 61% in the third quarter, up from 58% in Q2. This is an all-time record for ATI, and we're well on our way to our 65% target. What drove this expansion? Another significant step up in airframe demand, notably in titanium. Shipments of airframe materials surpassed $200 million in the third quarter. That's up more than 50% from the third quarter last year. It's a new record for us, surpassing our prior Q2 2019 high watermark. How do we achieve this? Ramping build rates, realization of well-earned share gains, and a lot of hard work industry analysts commonly refer to as operational executions. Our increased titanium melt capacity in Oregon has been a critical enabler to our top line growth. The modest investment to restart these three furnaces, coupled with additional steps that optimize overall melt throughput, helped expand our titanium melt capacity by 35% over the 2022 baseline. It's now producing at full run rate. Customer commitments for ATI titanium are so strong that we're currently bringing online a fourth and most likely the last furnace at that same Oregon melt facility. This additional furnace will produce high value, especially titanium alloys that are in fierce demand by our customers with critical applications. It fills another gap left by the much discussed geopolitical disruption to the supply chain. This latest incremental step, coupled with highly efficient execution by our operating team, will enable an additional $50 million in titanium revenue per year. We're on track to ramp capacity in the first half of 2024, reaching that higher full run rate in the second half. This investment falls within our existing CapEx guidance. All in, we've increased titanium capacity by 45 percent through restarts and optimizations, up from the 35 percent we'd previously forecast. And we still have our Richland Washington melt expansion coming online in 2025. How strong is titanium demand today? In just 12 months, total ATI titanium sales are up approximately 75%. It's an incredible ramp. Strong demand, customer commitments, and these timely and efficient capacity additions. Some cases, we're the only game in town. And the stronger bottom line results are clearly ahead for us. Pretty exciting time to be part of ATI. Let's move to my second point. Our transformational actions are making a difference. They're delivering increased profitability with more room to expand. ATI's transformation, which began in the depths of COVID, is driving meaningful results in the business today. This was another quarter of sequential EBITDA growth and margin improvement. HPMC's EBITDA margins hit 21.5% in Q3. We're making great and steady progress. By 2025, we target delivering HPMC margins consistently in the low to mid-20% range. We're working every day to accelerate shipments, de-bottleneck and streamline operations, and optimize flow times throughout the system. As this high-value material works its way through ATI's finishing facilities, downstream operations are being tested and are delivering more than ever before. We're not immune to challenge. new bottlenecks emerge, and sometimes legacy electrical transformers fail. That was the case at our Lockport, New York MELD operation in Q3. While the operating team got the power back on relatively quickly, the outage created a potential divot in our Q4 shipments. The team has responded aggressively, taking steps to significantly offset what otherwise would be a Q4 bottom line impact. Strong demand means we've been running hard, so we're increasing our focus on preventive maintenance to ensure consistent operations. In our advanced alloys and solutions segment, aerospace and defense mix continues to improve. It reached 35% in Q3. That's eight points higher than a year ago. That's good news when you think of long-term growth opportunities for these markets. Industrial demand softens. We know that's caused by transitory conditions. Operationally, we've taken actions to align our near-term cost structure with this lower demand. Commercially, we're focused on optimizing our product mix. This is another reminder why being an aerospace and defense leader is at the core of our strategy. We're at our best in markets with long-term growth potential where ATI's differentiated capabilities are critical to our customers' success. and where the returns generated reflect the essential value of those materials. What else are we doing to transform? In October, we announced that we reduced our qualified pension obligations by 85 percent through annuitization and made additional contributions, which we expect will fully fund the remaining 15 percent. Let me take a second to be really clear here. This is a huge milestone for us and for the team at ATI. We've worked on this a long time. We've talked about it in almost every earnings call for five, six, seven, maybe a decade years. But we've been very deliberate in getting here, meeting our commitments to our retirees and to our shareholders. I'm pleased that we're at this point, appreciate the team's hard work and diligent preparation for something like an annuitization for what we accomplished. It's great. This transaction significantly de-risks ATI's balance sheet and enhances our ability to generate substantial cash flow going forward. As we share this pension annuitization of greatest benefit to the AANS segment, where we should see meaningfully lower pension expense starting this quarter. My third point today, ATI continues to deliver. Our adjusted earnings per share were 55 cents. This is above the midpoint of our August guidance. We see this momentum continuing into 2025 and beyond. Now, Don will take us through the financials and talk a bit about Q4 and what's ahead. Then I'll be back to close out and take us into the Q&A. Don?